Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[neroden]

I don’t know. Tesla’s management would have known that when they decided not to raise capital though.

A history lesson on production from the Q2 2018 letter:

“During the month of July, we have repeated weekly production of approximately 5,000 Model 3 cars multiple times while also producing 2,000 Model S and X per week. Having achieved our 5,000 per week milestone, we will now continue to increase that further, with our aim being to produce 6,000 Model 3 vehicles per week by late August. We then expect to increase production over the next few quarters beyond 6,000 per week, while keeping additional capex limited.”

I dont mean to sound like a troll. But we’re still not hitting an average of 5k per week over a 13 week quarter. People that are expecting some miracle dust to lead to a GAAP profit in Q1 or 500k total deliveries in 2019 need a reality check.

So is the problem demand, production or cash on hand for working capital?

Production. I mean this is obvious, right?

 

[neroden]

OT

But that only works where people and jobs are in a tightly congested areas. Not the case in many North American cities where jobs and people are spread out.

Sure. But I can point to at least one good electric urban rail line location in practically every city with a population of 500,000 or more. To get to those population levels, you can't be totally sprawly.

To their credit some of these larger cities are building said lines. Others (cough, Columbus Ohio, cough) are not.

 

[bdy0627]

I posted this in the near future quarterly financials thread but would like more input about it. I'm curious what others think about likely revenue growth over the next 18 months. This model projects deliveries of 344,000, so a miss on guidance of 360,000+ for 2019.
I think that's a reasonable miss to expect at this point. I have a very difficult time going much higher than these delivery numbers right now. Do others think, based upon the execution we are seeing, that these numbers are overly conservative? I think this illustrates just how amazing Q3 and Q4 2018 were. From a revenue standpoint, they were rather incredible. These numbers at least point to Q4 2019 finally reaching the revenue achieved in Q4 2018. I think it's very unlikely to occur before then. Q1 2020 drops back down below Q4 2018 revenue level due to S/X seasonality and decreasing model 3 ASPs. It's back up above in Q2 2020. This model assumes Tesla reaches a production level of about 7,500 by the end of 2019. Again, this is auto revenue only. Obviously, this involves a lot of guesswork about deliveries and ASP.

Q4 2018
3 production: 61,394 (4,700 per week)
3: 63,150 (ASP $55,800)
S/X: 27,550 (ASP $104,000)
Total: 90,700
Total Auto Revenue: $6,389B

Q1 2019
3 production: 63,000 (4,800 per week)
3: 50,900 (ASP $54,000)
S/X: 12,100 (ASP $102,000)
Total: 63,000
Total Auto Revenue: $3,983B

Q2
3 production: 71,000 (5,500 per week)
3: 61,000 (ASP $52,000)
S/X: 17,000 (ASP $102,000)
Total: 78,000
Total Auto Revenue: $4,906B

Q3
3 production: 83,000 (6,400 per week)
3: 72,000 (ASP $50,000)
S/X: 22,000 (ASP $102,000)
Total: 94,000
Total Auto Revenue: $5,844B

Q4
3 production: 97,000 (7,500 per week)
3: 86,000 (ASP $49,000)
S/X: 23,000 (ASP $102,000)
Total: 109,000
Total Auto Revenue: $6,560B

Q1 2020
3 production: 106,000 (8,100 per week)
3: 95,000 (ASP $47,000)
S/X: 17,000 (ASP $102,000)
Total: 112,000
Total Auto Revenue: $6,199B

Q2 2020
3 production: 118,000 (9,100 per week)
3: 106,000 (ASP $46,000)
S/X: 18,000 (ASP $102,000)
Total: 124,000
Total Auto Revenue: $6,712B

Q3 2020
3: 117,000 (ASP $45,000)
S/X: 22,000 (ASP $102,000)
Total: 139,000
Total Auto Revenue: $7,509B

 

[Cherry Wine]

I am a big supporter of Tesla. I own one and bought stock. About 25% of my portfolio is in TSLA. I bought it last year at about $290, believing in the imminent rise of the stock due to increased production. "Short burn of the century"
It didn't materialize and since last quarters deliveries and especially production numbers I am getting cold feet.

My stock are under water and I am at loss what to do. My stock are for a study plan for my kidsI don't need to cash it for another year as my oldest daughter is only going to college next year. Shall I take my loss now before the stock tanks further or is there still hope they will recover. Some things that make me nervous:

- how come that M3 is still not sustainable at 5,000 per week - let alone 6,7, or even 8,000 a week?

- what is it with all these pictures with dust covered cars?

- I see people on YouTube ordering a car only to be called by Tesla within hours that they have a deal for a new 2018 M3. So there is a big stock?

- what is indeed the story with the solar roof? Absolutely nothing is happening there

- suddenly, after years, there is a big push in Software. I don't believe in coincidences. So this in combination with the bad sales and production figures makes me suspicious. Are they trying to change the focus?

-all these restless strategies around pricing of cars and software seems very nervous and not reassuring at all

I could probably think of more.

Am I alone this? Just wondering what other people think and are considering doing

I have lowered my cost basis quite a bit by selling covered calls. For instance, if TSLA closes below $270 this week I will have lowered my cost basis by $7.25/share this week alone. I don’t have access to my spreadsheet, but expect that will lower my cost basis by somewhere around a total of $50/share since last November to $239.

This, of course, carries different risks. Though I am skeptical of the stock skyrocketing without warning, it could happen. I just find that prospect less likely than a steadier climb, and I carry uncovered call options to capture some of that rise. (Look up delta hedging.)

There are several members on here to speak to about this issue who could maybe offer their thoughts. Though I lack the experience that others have, I’m happy to talk further via PM.

 

[neroden]

I'm not that worried about production. Infact, there were so many changes in Q1 - I'm surprised they still managed to make so many 3s in Q1 !

I am worried that changes to the line cause so much downtime. Perhaps this is unavoidable.

But with Tesla's "agile"' methodology, this means lots of changes... and if that means lots of downtime, we have a permanent problem.

Also, if switching between US, China, and Euro spec models causes this much downtime *every* time, Tesla's gonna have real trouble if they have to do those switches every quarter. I'm hoping it's a "learning experience" from doing Euro and China models for the *first* time and that future switches will be much quicker.

 

[jhm]

Reuters: SEC steps on Tesla 'reasonable' to prevent problems: commissioner

WASHINGTON (Reuters) - The U.S. securities watchdog’s request that a federal judge hold Tesla Inc Chief Executive Elon Musk in contempt over the billionaire entrepreneur’s use of Twitter was “reasonable,” said a U.S. Securities and Exchange Commission official on Monday.

SEC Commissioner Robert Jackson, a Democrat, told reporters at a conference in Washington that the SEC was reasonable in suggesting greater oversight of Musk’s communications, including the threat of new fines if he backslides.

Notice the temporal shift here. It's not reasonable because Musk has in fact done a demonstratively bad thing worthy of punishment, but it is "reasonable" because they want to be able to prevent him from doing bad things in the future.

“The idea (is) that we would have future oversight to prevent future problems from recurring,” Jackson said.

We should all be punished pre-emptively for our future misdeeds!

 

[neroden]

TE is ~0% gross margin, an improvement from most/all of 2018 when it was negative.

We know there's time-based depreciation screwing up those numbers, though.

 

[Prunesquallor]

OT

Sure. But I can point to at least one good electric urban rail line location in practically every city with a population of 500,000 or more. To get to those population levels, you can't be totally sprawly.

Ha! Come visit Houston.

 

[oneday]

Steady climb happening, looks like we will turn back green.

 

[KarenRei]

This also shows why people on the left are mainly concerned about government action to solve climate change. "Free market" is incapable of solving such a fundamental problem - if profit is the only motivation. We have to ban fracking and make it illegal to flare gas.

Um... don't ban gas flaring before SpaceX can get rid of Starship Hopper's flare towers, okay?

 

[neroden]

But those payments can only be recognised in the P&L according to accounting standards which generally have to reflect the performance of the underlying contract.

And we don't know the terms of the contract, which is commercially confidential.

I mean, at one extreme, the contract could say "Tesla agrees to pool its fleet with Fiat Chrysler for 1 year and Fiat Chrysler agrees to pay $300 million." Performance completed.

It could be something more complicated. We don't know.

 

[Doggydogworld]

Where did you get 20k model 3 in inventory from Q1? I see in transit from Q4 2,900 (including S/X), production of 62,950, deliveries of 50,900, in transit from Q1 10,600 (including S/X).

Through 3/31/19 Tesla produced 218,612 Model 3s and delivered 198,719 (adding quarterly announcements, summarized here):
Tesla Model 3 - Wikipedia

Tesla said 10,600 cars were in transit on 3/31, I estimate 8k were Model 3s and the rest S/X. That leaves 12k unsold Model 3s.

My stock are under water and I am at loss what to do. My stock are for a study plan for my kidsI don't need to cash it for another year as my oldest daughter is only going to college next year.

The stock market is a bad place to put cash you need in a year or less. The company could do quite well and the stock still drop 50% during that time. Also, it doesn't matter whether you have a loss or a gain. Your decision should be the same whether you bought at $370 during Funding Secured or at $170 a few years ago.

 

[Prunesquallor]

Notice the temporal shift here. It's not reasonable because Musk has in fact done a demonstratively bad thing worthy of punishment, but it is "reasonable" because they want to be able to prevent him from doing bad things in the future.



We should all be punished pre-emptively for our future misdeeds!

We agree.

 

[jhm]

I posted this in the near future quarterly financials thread but would like more input about it. I'm curious what others think about likely revenue growth over the next 18 months. This model projects deliveries of 344,000, so a miss on guidance of 360,000+ for 2019.
I think that's a reasonable miss to expect at this point. I have a very difficult time going much higher than these delivery numbers right now. Do others think, based upon the execution we are seeing, that these numbers are overly conservative? I think this illustrates just how amazing Q3 and Q4 2018 were. From a revenue standpoint, they were rather incredible. These numbers at least point to Q4 2019 finally reaching the revenue achieved in Q4 2018. I think it's very unlikely to occur before then. Q1 2020 drops back down below Q4 2018 revenue level due to S/X seasonality and decreasing model 3 ASPs. It's back up above in Q2 2020. This model assumes Tesla reaches a production level of about 7,500 by the end of 2019. Again, this is auto revenue only. Obviously, this involves a lot of guesswork about deliveries and ASP.

Q4 2018
3 production: 61,394 (4,700 per week)
3: 63,150 (ASP $55,800)
S/X: 27,550 (ASP $104,000)
Total: 90,700
Total Auto Revenue: $6,389B

Q1 2019
3 production: 63,000 (4,800 per week)
3: 50,900 (ASP $54,000)
S/X: 12,100 (ASP $102,000)
Total: 63,000
Total Auto Revenue: $3,983B

Q2
3 production: 71,000 (5,500 per week)
3: 61,000 (ASP $52,000)
S/X: 17,000 (ASP $102,000)
Total: 78,000
Total Auto Revenue: $4,906B

Q3
3 production: 83,000 (6,400 per week)
3: 72,000 (ASP $50,000)
S/X: 22,000 (ASP $102,000)
Total: 94,000
Total Auto Revenue: $5,844B

Q4
3 production: 97,000 (7,500 per week)
3: 86,000 (ASP $49,000)
S/X: 23,000 (ASP $102,000)
Total: 109,000
Total Auto Revenue: $6,560B

Q1 2020
3 production: 106,000 (8,100 per week)
3: 95,000 (ASP $47,000)
S/X: 17,000 (ASP $102,000)
Total: 112,000
Total Auto Revenue: $6,199B

Q2 2020
3 production: 118,000 (9,100 per week)
3: 106,000 (ASP $46,000)
S/X: 18,000 (ASP $102,000)
Total: 124,000
Total Auto Revenue: $6,712B

Q3 2020
3: 117,000 (ASP $45,000)
S/X: 22,000 (ASP $102,000)
Total: 139,000
Total Auto Revenue: $7,509B

Are you thinking that Q2 2019 will end with some 20k vehicles in transit? It begins with 10k in transit and produces 10k more than delivered, so I think that works out to 20k undelivered by end of Q2. So you may want to model the quantity undelivered at the end of each quarter to be sure it is not growing unreasonably large.

My hope catch up on some of those deliveries in Q2!

 

[Dutchie]

Seem you are a legit owner instead of a troll as it really sounds like.
My advice is to avoid Tweeter when you’re looking for TSLA news.

I have similar cost basis as you and I didn’t sell at 370, and I am certainly not selling at current price levels.
Not an advice.

I just quoted you but I want to thank all of you for the answers. Like I said I have about 25 % invested in the company. Assuming my daughter goes on to do a four years college course I will not need it for another five years as I can sell the other equities first.

I don't reply to this threat often but it is a pity that people need to question every post for trolls.

I think sometimes my disappointment is not so much financial. I really love the car, the technology and the company. and I just want them desperately to succeed. The world would be in such a better shape. I just cannot understand that people are against them. And when I see the company facing a challenge it bites a bit

I saw a post the other day about the deal from Fiat Chryler where someone said "If this goes on, Tesla will never go bankrupt" like if he was sad that it would not go bankrupt and rooting it for it go bankrupt! It is like hoping someone would die.

Heck, even my brother is a hater. He lives in Australia where he says that hardly nobody drives them because they love their V8's. He is always talking about that "expensive contraption" I am driving and cannot understand I paid so much money money for a car. Though we used to talk about cars all the time I now avoid talking about it with him.

 

[ZeApelido]

I am a big supporter of Tesla. I own one and bought stock. About 25% of my portfolio is in TSLA. I bought it last year at about $290, believing in the imminent rise of the stock due to increased production. "Short burn of the century"
It didn't materialize and since last quarters deliveries and especially production numbers I am getting cold feet.

My stock are under water and I am at loss what to do. My stock are for a study plan for my kidsI don't need to cash it for another year as my oldest daughter is only going to college next year. Shall I take my loss now before the stock tanks further or is there still hope they will recover. Some things that make me nervous:

- how come that M3 is still not sustainable at 5,000 per week - let alone 6,7, or even 8,000 a week?

- what is it with all these pictures with dust covered cars?

- I see people on YouTube ordering a car only to be called by Tesla within hours that they have a deal for a new 2018 M3. So there is a big stock?

- what is indeed the story with the solar roof? Absolutely nothing is happening there

- suddenly, after years, there is a big push in Software. I don't believe in coincidences. So this in combination with the bad sales and production figures makes me suspicious. Are they trying to change the focus?

-all these restless strategies around pricing of cars and software seems very nervous and not reassuring at all

I could probably think of more.

Am I alone this? Just wondering what other people think and are considering doing

HODL

 

[AlMc]

Reuters: SEC steps on Tesla 'reasonable' to prevent problems: commissioner

WASHINGTON (Reuters) - The U.S. securities watchdog’s request that a federal judge hold Tesla Inc Chief Executive Elon Musk in contempt over the billionaire entrepreneur’s use of Twitter was “reasonable,” said a U.S. Securities and Exchange Commission official on Monday.

SEC Commissioner Robert Jackson, a Democrat, told reporters at a conference in Washington that the SEC was reasonable in suggesting greater oversight of Musk’s communications, including the threat of new fines if he backslides.

Not surprising. It is essentially what the SEC lawyer indicated when asked by the judge what they felt appropriate IF she found Musk in 'contempt'.

IMO, to save face they really need to push this narrative publicly while Musk/his team probably have to stay quiet.

If the negotiations play out the way I expect there will be some form of monthly reporting by the Tesla oversight committee on what tweets they 'approved' and which ones EM tweeted out on his own. Big whoop

 

[bdy0627]

Are you thinking that Q2 2019 will end with some 20k vehicles in transit? It begins with 10k in transit and produces 10k more than delivered, so I think that works out to 20k undelivered by end of Q2. So you may want to model the quantity undelivered at the end of each quarter to be sure it is not growing unreasonably large.

My hope catch up on some of those deliveries in Q2!

You're right. I was using about 13% in transit at the end of each quarter but I didn't account for the in transit number coming into each quarter. That will help the numbers. Thanks!

 

[EVNow]

I am worried that changes to the line cause so much downtime. Perhaps this is unavoidable.

But with Tesla's "agile"' methodology, this means lots of changes... and if that means lots of downtime, we have a permanent problem.

Also, if switching between US, China, and Euro spec models causes this much downtime *every* time, Tesla's gonna have real trouble if they have to do those switches every quarter. I'm hoping it's a "learning experience" from doing Euro and China models for the *first* time and that future switches will be much quicker.

First time change always takes a lot more time than nth change.

As they say - if you want to be good at something tough - do it more often. Infact, I expect when they make similar changes for the first time for Y - it will be less tough. (ps : this was said specifically in terms of a software release being tough. But just see how companies improved their processes and release software updates so often now).

But, in Q1, it didn't matter. They had even tougher delivery issues to handle.

 

[neroden]

OT

Ha! Come visit Houston.

Houston is possibly the sprawliest city there is, yes.

And yet there is at least one good route in Houston (the Red Line is clearly a highly effective route, and frankly the Purple Line looks pretty good too), despite the parking lot craters which have eaten the central business district.